SevenToTen - Blogging About Everything

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More of the predatory snaring in Wall Street. The situation with Microsoft’s bid on Yahoo seems to be locked in a stalemate.

The software giant has announced that it may rescind its offer to buy Yahoo at $31 a share. Both sides cannot arrive at an agreeable price but it is clear Microsoft execs will not paying the $40 per share that Yahoo demanded.

The offer is not likely to be revoked, this is more of a tactic to put pressure on Yahoo’s board using “market signaling.” The message is that Yahoo’s stock would become vulnerable if Microsoft withdraws its bid. They are confident Yahoo has little alternative but to accept the deal.

The problem for Yahoo is the current offer significantly undervalues the company and they have rejected Microsoft’s overture in February. The deal has since decreased in value from $44.6 billion offer on Jan. 31 to the current $42 billion.

I believe it is best Yahoo accept the offer, holding out will only push the prices of both companies downwards. Unless Yahoo comes up with ingenious methods to boost earnings as revenue from advertisers is not expected to do well this year. No other giants want to enter the fray too, either because they cannot compete with the financial muscle of Microsoft or because they do not find Yahoo attractive enough.

Oh no, job cuts and unemployment on the rise. New York, being closely tied to Wall Street, can expect a lot of people out of the streets.

As the city braces for a big contraction in the financial sector as a result of the credit crisis and the collapse of Bear Stearns, the fallout could be worse than in the past.

The New York economy is more dependent than ever on high Wall Street incomes. Last year, the finance industry was responsible for nearly a third of all wages earned in the city, the highest in modern times. And each Wall Street job supports three workers in other sectors.

A great many of the 14,000 employees of Bear Stearns are expected to lose their jobs because of the firm’s cash shortage and its pending acquisition by JPMorgan Chase. As the credit crisis unfolds and other firms discover the depths of their losses related to bad loans, few expect the layoffs to stop there.

Now there are signs of nervousness, and not just among bankers and traders. Some prospective buyers in the pricey condominium market have put their plans on hold.

The last time Wall Street had a similar contraction was after the technology bubble burst seven years ago. At that time, financial firms cut 60,000 jobs in the New York City area, or 1 in every 10 finance position.